if the marginal propensity to consume (MPC) is equal to 0.7, government increases spending by $X,...

Question

Question

if the marginal propensity to consume (MPC) is equal to 0.7, government increases spending by $X, and the GDP increases by $1000. Calculate $X.

	A.	$500
	B.	$100.
	C.	There is not enough information to answer the question.
	D.	$ 400.
	E.	$300.

Answer 1

Answer #1

Mpc=0.7 then multiplier=1/1-Mpc=1/1-.7=1/0.3=3.33

multiplier=Change in income/change in Govt expenditure

and GDP increases by 1000 then change in G must be 1000/3.333=300

ans is E

Answer 2

Similar Homework Help Questions

If the marginal propensity to consume (MPC) equals 0.25 and the government increases spending by $600...

If the marginal propensity to consume (MPC) equals 0.25 and the government increases spending by $600 billion, the total impact on GDP will be approximately:
If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase...

If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase real GDP by $400 million, then by how much would government spending have to change to generate this increase in real GDP? Group of answer choices a. $200 million. b. $400 million. c. $140 million. d. $100 million.
If autonomous investment increases by $100 million and the marginal propensity to consume (MPC) is 0.75, then

If autonomous investment increases by $100 million and the marginal propensity to consume (MPC) is 0.75, then A. real Gross Domestic Product (GDP) will fall by $200 billion. B. real Gross Domestic Product (GDP) will rise by $100 billion. C. real Gross Domestic Product (GDP) will rise by $200 billion. D. real Gross Domestic Product (GDP) will rise by $400 billion.

If the marginal propensity to consume (MPC) is 2/3 and investment spending increases by $2 billion,...

If the marginal propensity to consume (MPC) is 2/3 and investment spending increases by $2 billion, the level of real output (GDP) will: increase by $10 billion. O increase by $3 billion. increase by $6 billion. O Increase by $8 billion
Given a marginal propensity to consume = .8 (Ceteris paribus) and the government increases the level...

Given a marginal propensity to consume = .8 (Ceteris paribus) and the government increases the level of transfer payments by $100, we should expect that the GDP will increase by $400. $80. $100. $500.
If the marginal propensity to consume (MPC) increases... A. The MPS increases B. The multiplier decreases...

If the marginal propensity to consume (MPC) increases... A. The MPS increases B. The multiplier decreases C. MPC +MPS is less than 1 D. THe multiplier increases

Suppose the marginal propensity to consume is 0.8. The government increases government spending and taxes by...

Suppose the marginal propensity to consume is 0.8. The government increases government spending and taxes by $10 billion. What happens to aggregate output demanded?
1). Given a marginal propensity to consume = .8 (Ceteris paribus) and the government increases the...

1). Given a marginal propensity to consume = .8 (Ceteris paribus) and the government increases the level of transfer payments by $100, we should expect that the GDP will increase by a. $500. b. $80. c. $100. d. $400. 2). Suppose that actual GDP (Y) for France is 100 euros and: Consumption = 10 + .5Y Investment Spending = 5 Government Expenditure = 20 The Marginal Tax Rate (t) = .20 At these current levels, the size of the budget...
7. If marginal propensity to consume (mpc) is 0.8, tax rate (t) is 0.2, and marginal...

7. If marginal propensity to consume (mpc) is 0.8, tax rate (t) is 0.2, and marginal propensity to import (mpm )is 0.14, then the multiplier is: a) 4 b) 2 c) 3 d) 2.33 Your answer: Explanation: le 8. Given the value of the multiplier you got from question 7, if the government wanted to raise the equilibrium GDP by 100, it could: a) Raise only G by $100 b) Raise both G and T by 50 c) Raise only...

Question 49 2 pts Given a marginal propensity consume = 8 (Ceteris paribus) and the government...

Question 49 2 pts Given a marginal propensity consume = 8 (Ceteris paribus) and the government increases the level of transfer payments by $100, we should expect that the GDP will increase by $400. O $100. O $80. O $500. Question 50 2 pts Given the following data for an economy, the value of the marginal propensity to invest is equal to: Consumption = 50+.75Y Investment = 20+.10Y Government = 60 Taxes = .20Y